T.C. Summary Opinion 2005-64
UNITED STATES TAX COURT
CHARLES LEVINE PRESTON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 4582-04S. Filed May 24, 2005,
Charles Levine Preston, pro se.
Willard N. Timm, Jr., for respondent.
COUVILLION, Special Trial Judge: This case was heard
pursuant to section 7463 in effect when the petition was filed.1
The decision to be entered is not reviewable by any other court,
and this opinion should not be cited as authority.
1
Unless otherwise indicated, subsequent section references
are to the Internal Revenue Code in effect for the year at issue.
All Rule references are to the Tax Court Rules of Practice and
Procedure.
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Respondent determined a deficiency of $4,678 in petitioner’s
Federal income tax for the year 1998, a section 6651(a)(1)
addition to tax of $2,074.32, and a section 6654(a) addition to
tax of $212.32. At trial, respondent reduced the deficiency to
$1,381 and the additions to tax to $268 and $47, respectively.
Petitioner does not dispute the deficiency. The issues for
decision are whether the statute of limitations under section
6501 bars respondent from assessing petitioner’s 1998
liabilities, and, if respondent is not barred, whether petitioner
is liable for the additions to tax.
Some of the facts were stipulated. Those facts, with the
exhibits annexed thereto, are so found and made part hereof.
Petitioner’s legal residence at the time the petition was filed
was Riverdale, Georgia.
Petitioner did not file his 1998 Federal tax return until
November 19, 2003. He had not previously requested an extension
of time to file, nor had he made any estimated payments toward
his 1998 tax liability. Respondent recorded the receipt of
petitioner’s 1998 Federal tax return on December 22, 2003;2
however, respondent had, on December 17, 2003, already issued a
notice of deficiency based on a substitute for return filed on
September 5, 2003, by respondent. The substitute for return
2
The stipulation of facts states that petitioner filed his
1998 tax return on Nov. 19, 2003, and the tax return was entered
into the IRS database on Dec. 22, 2003.
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allowed no deductions or exemptions; therefore, the notice of
deficiency reflected a much larger tax liability than that agreed
to by respondent at trial. When petitioner met with the Appeals
officer, the Appeals officer accepted the computations petitioner
listed on his late-filed return and reduced the deficiency to the
above amount.
Petitioner has worked as a firefighter for 18 years. Since
at least 1998, he has been employed as such by the city of
College Park, Georgia. Petitioner reported wages of $27,543 from
the city on his late-filed 1998 Federal income tax return;
however, petitioner did not include income of $7,869 from a
qualified pension plan, the International City Management
Association Retirement Corp Trust (ICMA Retirement Trust), early
distribution. In 1998, petitioner withdrew $7,869 from the ICMA
Retirement Trust for payment of medical expenses for his wife in
excess of those covered by his health insurance.3 Petitioner did
not include the distribution from the ICMA Retirement Trust as
income on his tax return.
Petitioner bears the burden of proving he is not liable for
the deficiency.4 At trial, petitioner did not challenge the
3
Respondent conceded that petitioner is not liable for the
sec. 72(t) additional tax for early withdrawal on this
distribution.
4
Generally, the determinations of the Commissioner in a
notice of deficiency are presumed correct, and this presumption
(continued...)
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determination that the early ICMA Retirement Trust distribution
was income. Petitioner referred to a number of Internal Revenue
Code sections and legal conclusions during his testimony, but his
primary contention is that respondent is barred by the statute of
limitations on assessment for his 1998 tax year.
Generally, the Commissioner is allowed 3 years after a
return is filed to issue a notice of deficiency. Sec. 6501.
Petitioner contends that because respondent issued the notice of
deficiency in 2003, the 3-year period of limitations bars
assessment and collection against him. The Court disagrees with
this argument. The filing of petitioner’s Federal income tax
return is the event that commences the 3-year period of
limitations. Sec. 6501(a). Petitioner filed his 1998 Federal
income tax return on November 19, 2003. Respondent issued the
notice of deficiency to petitioner for the 1998 tax year on
December 17, 2003.5 That is well within the period of
4
(...continued)
places the burden on the taxpayer to show that the determinations
are incorrect. Rule 142(a); INDOPCO, Inc. v. Commissioner, 503
U.S. 79, 84 (1992); Welch v. Helvering, 290 U.S. 111, 115 (1933).
Sec. 7491(a), under certain circumstances, alters the burden of
proof with respect to a taxpayer’s liability for taxes in court
proceedings arising in connection with examinations commencing
after July 22, 1998. Although this examination commenced after
July 22, 1998, the issue does not fall within the scope of sec.
7491(a). Petitioner, therefore, bears the burden of proof.
5
The fact that respondent based his notice of deficiency on
a substitute for return that was filed on Sept. 5, 2003, is
immaterial. Had petitioner never filed his 1998 Federal tax
(continued...)
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limitations; therefore, respondent is not barred from assessment
and collection of the tax against petitioner. In the absence of
a challenge to the determined deficiency, petitioner is,
therefore, liable for the tax of $1,381.
Respondent determined a section 6651(a)(1) addition to tax
against petitioner.6 A taxpayer is subject to an addition to tax
for failure to file a timely return unless he can establish that
such failure “is due to reasonable cause and not due to willful
neglect”. Sec. 6651(a)(1). Willful neglect is defined as “a
conscious, intentional failure, or reckless indifference.”
United States v. Boyle, 469 U.S. 241, 245 (1985). Petitioner was
required to file a timely Federal income tax return for 1998.
See sec. 6012.
Petitioner filed his 1998 Federal income tax return almost 5
years late. When asked at trial why he did not file timely,
petitioner responded: “I made an error. Let’s put it that way
* * * I did not get the paperwork to * * * [the tax preparer] on
time, and I, during that part of, during that year, some things
were going on and I just made a mistake. It was my fault it
5
(...continued)
return, the 3-year period of limitations would not have
commenced, and the notice of deficiency could have been issued at
any time. Sec. 6501(c)(3).
6
Respondent has met his burden of production with respect to
the addition to tax, and petitioner has the burden of proving
that he is not liable for the addition. See sec. 7491(c); Higbee
v. Commissioner, 116 T.C. 438, 446-447 (2001).
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didn’t get turned in.” Although petitioner may have had numerous
concerns or problems, simply neglecting or forgetting to file his
Federal tax return does not amount to “reasonable cause”. See
sec. 6651(a)(1); United States v. Boyle, supra at 246.
Respondent is, therefore, sustained on this issue.
Respondent also determined a section 6654 addition to tax
against petitioner. A taxpayer is subject to this addition to
tax “in the case of any underpayment of estimated tax by an
individual”. Sec. 6654. Subject to certain statutory
exceptions, the addition to tax is automatically applied if the
amounts of withholding and estimated tax payments do not equal
statutorily designated amounts. Niedringhaus v. Commissioner, 99
T.C. 202, 222 (1992).
The statute, however, provides an exception to this
automatic imposition where the preceding taxable year was 12
months, the taxpayer did not have any liability for tax for such
year, and the taxpayer was a citizen or resident of the United
States throughout the preceding taxable year. Sec. 6654(e)(2).
Petitioner is a U.S. citizen and had no income tax liability for
the 1997 taxable year. Petitioner’s liability for the 1998
taxable year was not due to insufficient withholdings by his
employers, as respondent alleges, but due solely to the tax due
on a one-time early withdrawal from his retirement fund.
Petitioner falls within the stated exception in section
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6654(e)(2) and is, therefore, not liable for the section 6654
addition to tax.
The Court has considered all other arguments advanced by the
parties, and, to the extent such arguments have not been
specifically addressed, the Court concludes they are without
merit.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered for
respondent for the deficiency and the
section 6651(a)(1) addition to tax and
for petitioner for the section 6654(a)
addition to tax.